Australian coal ports struggle with debt loads

The future of three of Australia's main coal export terminals is uncertain amid lower throughput and high debt levels looming for Queensland's Abbot Point port, Dalrymple Bay Coal Terminal (DBCT) and the Wiggins Island Coal Export Terminal (Wicet) at Gladstone.

The Covid-19 pandemic has had little impact on the daily operations of Australia's coal mining industry. But it has forced many to reconsider development plans that were already under pressure from plateauing exports and expected reduced demand over the medium term. This restraint in committing to growth projects is creating uncertainty for the highly indebted ports.

Gladstone, DBCT, Hay Point and Abbot Point operated at a combined utilisation rate of just 75pc in 2019 and the distribution was uneven.

The BHP Mitsubishi Alliance-operated Hay Point operated at 91pc capacity, DBCT at 79pc, Gladstone at 71pc and Abbot Point at 60pc in 2019. The new 27mn t/yr Wicet terminal at Gladstone operated at less than 50pc capacity, according to initial shipping data.

Wicet and Abbot Point are highly loaded with debt. Abbot Point owner Indian firm Adani had to inject A$100mn ($63mn) to cover the port's debt that are due in May, while it delayed refinancing negotiations on a further A$1.1bn due in the next three years citing uncertainty surrounding Covid-19.

Japanese bank MUFC sold $80mn of its debt in Wicet at less than 60¢ in the dollar, implying issues about the port's ability to repay its around $3bn of debt. Wicet reached an agreement with its lenders to extend repayment on $2.6bn of its debt until 2026. But it still has to repay another A$383mn in junior debt this year, as well as having another A$575mn shareholder loan due in 2046. Wicet, which is the most expensive coal terminal in Australia, struggled to increase its throughput even when coal exports were increasing. It is unclear how it will be able to attract new customers as market conditions prompt many to reconsider growth plans.

Infrastructure investment fund Brookfield has put on hold its process to try to sell DBCT, citing travel restrictions related to the pandemic. But market participants suggest it was struggling to find a buyer willing to pay what it was asking prior to the coronavirus outbreak. DBCT has had a slow start to 2020, with an average of 4.86mn t/month shipped during January-March compared with 5.56mn t/month in all of 2019. January-March is often soft because of the Queensland wet season, although this year's period has been relatively calm compared with previous years.

The weak balance sheets of the Queensland coal ports could see a period of underinvestment, as owners seek to maximise short-term returns, potentially reducing the capacity of the ports in the medium term.

By Jo Clarke

source: Argus Media